Source Energy Services (SHLE) Q2 2024 earnings summary

Executive summary

• Achieved record sand sales volumes of 921,148 metric tons and sand revenue of $140.1 million (CAD 141.1 million) in Q2 2024, up $38.1 million from Q2 2023.

• Total revenue reached $176.4 million, a $49.4 million increase year-over-year.

• Net income was $4.7 million for Q2 2024; Adjusted EBITDA rose by $10.4 million to $30.8 million year-over-year.

• Delivered record sand volumes to well sites and achieved 80% utilization across the Sahara fleet.

• Announced a partnership with Trican Well Service to develop a new terminal in Taylor, BC, supporting LNG-driven growth.

Financial highlights

• Gross margin was $32.6 million, up 31%, and Adjusted Gross Margin was $42.1 million, up 40% from Q2 2023.

• Free Cash Flow for Q2 2024 was $13.5 million, up $5.7 million year-over-year; year-to-date free cash flow reached $29 million.

• Reduced total debt by $26.4 million from the previous quarter; Senior Secured Notes reduced to $140.5 million.

• Working capital surplus of $42.5 million as of June 30, 2024, exceeding the drawn ABL balance of $13.4 million.

• Cost of sales (excluding depreciation) rose to $134.2 million due to higher volumes and rail costs.

Outlook and guidance

• Anticipates continued strong industry activity in the WCSB and Montney, driven by LNG projects and natural gas demand, supporting further market share gains and robust financial results.

• Expects sand pricing to remain stable with potential for spot price increases as LNG Canada nears completion.

• Frac sand supply and demand fundamentals are expected to remain strong through 2024.

• Long-term demand for services expected to rise with LNG exports and natural gas pipeline expansions.